GREECEMEMORANDUM OF ECONOMIC AND FINANCIAL POLICIES

A. Strategy and Outlook

1. Greece has made progress since the onset of the crisis in 2010, but continues to
face three crucial challenges:
x Restoring growth. Greece is in its fifth year of recession, with unemployment reaching
unprecedented levels, particularly among youth. Restoring growth and bringing jobs back
requires a deep restructuring of the economy, to shift the engine of growth from
consumption to exports and investment in the tradables sector.
x Securing fiscal sustainability. Despite the adjustment we have undertaken so far, further
efforts are needed to restore fiscal sustainability. These will have to spread the adjustment
burden fairly across the Greek population. Achieving a sustainable level of debt within the
eurozone is vital to reduce vulnerabilities and protect Greek citizens from even-deeper cuts
that would otherwise prove necessary.
x Securing the financial system. The deep recession combined with the recent public debt
restructuring has taken a toll on banks capital. Recapitalization of the banking system is
needed to restore depositor confidence and to lay the groundwork for a resumption of bank
lending.
2. The short term economic outlook remains difficult, but the adjustment process
is now moving faster. Delays in policy implementation and uncertainty during the
election period have resulted in a deeper recession than envisaged under the
program, while slow progress in structural reforms have not sufficiently addressed
price rigidities. However, our external deficit is projected to shrink at a faster pace
than expected, and competitiveness gains, measured by unit labor costs, are also
expected to come at a faster pace.
3. Against this backdrop, we have adapted policies in the program to better help
achieve our goals and in particular to more rapidly stabilize the economy:
x We have made it a priority to implement structural reforms designed to reduce prices
and encourage employment. Product and service market reforms have been front-loaded to
increase competition, help reduce prices and thus help protect real household incomes.
Privatization will also move forward at an accelerated rate to move assets to the private
sector and thereby facilitate new investment. Non-wage labor costs will be reduced, to
support hiring and to lessen pressure for nominal wage cuts.
x We will make a renewed near-term push to correct Greeces poor business
environment. When confidence returns, the government bureaucracy must not stand in the
way of new investment and the jobs that this would bring. Accordingly, licensing reforms
2
will be fully implemented, export procedures simplified, and the administrative burden of
Greeces complex tax system will be simplified.
x The government has programmed more time for fiscal adjustment, to help smooth the
recession. By taking an extra two years to reach our fiscal targets, we expect the pace of
fiscal consolidation to drop from 3 to 1 percent of GDP per year. This will limit the
negative growth impacts in 2013-14, when the economy needs to find a firmer footing,
while still preserving a good adjustment pace.
x Several initiatives will help support demand in the near-term. Increased absorption of
EU structural funds will help to sustain public investment, while new loans from the EIB to
banks will help support new lending to small and medium enterprises (SMEs). The program
provides resources to gradually clear government arrears, and we expect this to help
improve liquidity in the corporate sector. And to complement our work to recapitalize
banks, we are introducing measures to help banks efficiently work out debts with truly
distressed borrowers.
x We are enhancing our social safety net to help cushion those who are most deeply
affected by Greeces recession. We will leverage available EU structural funds and internal
resources to increase resources devoted to job training initiatives. We have also increased
the amount of resources available for unemployment insurance.
4. [Paragraph on financing to be added]
5. With our revised policies we expect to be able to stabilize the economy and start
a recovery in the next 12-18 months. Output would still contract by over 6 percent
in 2012, and about 4 percent next year, before starting to recover, on a quarter-
over-quarter basis, in [2013/2014]. Moderate inflation in 2012 would give way to
mild deflation in 2013. The current account would fall to a deficit of around [3]
percent of GDP by 2014. But to meet or, hopefully, exceed these projections, we
recognize the critical importance of strong and timely program implementation, to
support a return of confidence.
6. Greece has a positive outlook over the medium term. Growth is projected to
accelerate once the envisaged fiscal adjustment advances and structural reforms
translate into improved competitiveness. Over the medium term, inflation in Greece
is expected to remain below levels in our trading partners and our competitiveness
gap should close. This should help deliver a current account surplus around 2017.
[Details on debt outlook to be added].
B. Structural reforms
7. The government is determined to reinvigorate structural reforms to strengthen
the basis for economic growth. In particular, we are committed to comprehensively
3
liberalize product and service markets by removing unnecessary restrictions and
barriers to entry that currently impede competition and downward price adjustment.
We also continue to recognize the importance of ambitious business environment
reforms to remove barriers to investment. In addition, with the unemployment rate
unacceptably high, we are determined to implement fully recent labor market
reforms and to take further steps to improve the functioning of the labor market and
facilitate employment creation.
8. As a matter of priority, we will accelerate liberalization of product and service
markets. Citizens have made significant sacrifices by accepting lower wages and
benefits. Productions costs in the economy have declined, but output prices have not
dropped commensurately. This has to change. To deliver more efficiency and
productivity across the economy, and higher competitiveness, we will adopt a
package of liberalization measures as a prior action for the review (Annexes I.1-I.2)
and we have also defined several next steps:
x Retail market. Prices of many essential food products are high relative to comparators. We
will thus adopt far-reaching changes to repeal unnecessary restrictions, deriving mainly
from sanitary, labor, and transport regulations. These changes will allow a wider class of
goods to be sold by more efficient retailers, and reduce their operating costs. This in turn
should help contribute to lower prices and more choice for consumers.
x Fuel market. To allow downward adjustment of prices, legal changes will, inter alia, allow
small fuel retailers to import fuel without needing to construct large fuel storage facilities;
and permit independent retailers to buy directly from refineries and to transport their own
fuel. Taxes on diesel and heating oil will be equalized. We will guard against smuggling and
fraud by introducing new control mechanisms in fuel distribution and retailing.
x Transportation services. To reduce transportation prices and strengthen the
competitiveness of our tourism sector, we will adopt a number of measures, including: (i)
removing restrictions on the rental of pickup trucks, vans, chauffeur services; (ii) allowing
shuttle services by hotels and tour agencies using small vehicles (less than 12 seats) and tour
packages for small vans and off-terrain vehicles; (iii) liberalizing maritime transportation
(including by increasing the flexibility of routing and labor arrangements in shipping and
ferry services).
x Regulated professions and services. Our review of earlier efforts has revealed areas where
further and more ambitious efforts are needed. Our upfront actions will address several areas
(Annex I.2), with a focus on eliminating inconsistencies between sector specific legislation
and the 2011 law on professions, minimum fees for services, and mandatory use of services
in selected professions. We will also tackle a new group of 9 professions and activities of
economic importance. This will include: custom brokers, stevedores in ports, tourist
agencies, private education establishments, and [electricians] (Annex I.3). As a general
4
principle, the government is committed not to extend new reserved activities to specific
professions.
Next steps:We remain committed to liberalizing all regulated professions by
end-2012 per the 2011 law on professions (EFF structural benchmark). To
confirm our progress in this area, by March 2013 we will complete a study of the
20 largest professions examining the degree to which they have been liberalized,
including results with respect to new entrants and price changes.
We will undertake a new round of liberalization of transportation services by
[end-February 2013], with the aim to further strengthen the competitiveness of
our tourism sector. We will address restrictions and price rigidities affecting
airports and seaports, and inter-urban travel.
Finally, prices of a number of key goods and services are high in Greece
compared to other EU countries, particularly those for construction materials
(including cement and steel), and the housing and commercial rental markets.
Accordingly, using the OECD toolkit, and with the help of the Hellenic
Competition Commission and other regulators, the government will screen the
restrictions in these sectors, and also in the important food processing and
tourism sectors. We will prepare by date an action plan to promote competition
and facilitate price flexibility in these sectors as a matter of priority.
9. The government will also accelerate improvements in Greeces business
environment. While Greece has passed much legislation in this area, our overall
ranking in Doing Business Indicators remains unacceptably low. Our priorities
include:
x Licensing and regulation. The government will focus in the following three areas.
First, by end-November 2012 we will further simplify procedures for establishing
companies, including by allowing the use of model company statutes, streamlining
background checks on company founders, and reducing the minimum capital
requirements of new companies in line with best EU practices. Second, we will
publish by end-October 2012 a national trade facilitation strategy with time-bound
steps to simplify pre-customs and customs procedures and to increase working shifts
(Athens airport and Piraeus port will shift to 24/7 by end-2012). Third, by Q1 2013
we will complete the legal framework for the implementation of licensing laws,
especially on manufacturing activities and environmental projects and activities. For
the latter we will certify bodies to issue establishment and operating licenses and to
lay down the procedures and criteria for licensing.
x Judicial reform. We will continue with measures to reduce case backlog and
improve the efficiency of the judicial system. We will develop by [end-January
5
2013] an action plan with specific measures to reduce the non-tax case backlog.
Every quarter, starting from end-October, we will publish a report on progress in
backlog reduction, and update each quarter thk plauce the tax case backlog (with
priority on cases exceeding 1 million) starting from [end-Septemberefforts to
streamline the judicial process, a paper outlining the main proposals for amendments
to the Code of Civil Procedure will be prepared by [end-March 2013].
x Next steps. With assistance from the OECD we will screen legislation in a number
of areas (including the agriculture, energy, fisheries, and pharmaceutical sectors, as
well as public procurement) with a view to reduce the administrative burden. On the
basis of the findings of these reviews, we will propose by end-September 2013 the
needed amendments to our legal framework. We will also, by end-September 2013,
produce a comprehensive list of nuisance taxes and levies, and approve a plan to
incorporate them into the central government budget (along with the associated
spending), and to eliminate the majority of them in a budget neutral way in the 2014
budget (structural benchmark).
10. The government intends to build on recent labor market reforms to further
improve the functioning of the labor market and encourage job creation: The
labor reforms adopted in February 2012 under the program have already helped to
lower unit labor costs. The government will sustain the reforms and apply them
uniformly across the sectors to which they apply. However, the minimum wage
system in Greece remains complex and delinked from broader labor market
conditions, while non-wage labor costs remain excessive, contributing to pressure
for excess nominal wage declines and placing barriers in front of employment
creation. We have specified measures to tackle these issues, and the next steps
towards a stronger labor framework for Greece:
x As a prior action for the review (Annex II), the government [has established] a
timetable to reform Greeces minimum wage. Under the new framework, the basic
minimum wage and the maturity and marital allowances currently set in the national general
collective agreement will be progressively replaced by a minimum wage mechanism
legislated by the government after consultation with social partners and other stakeholders
and independent experts. This system, which will become effective by April 1 2013, will
include a single-rate statutory minimum wage as the binding floor for new labor agreements
and contracts, and the legally-binding maturity coefficients and allowances linked to the
minimum wage will be phased out by [April 2015], with the first step to become effective at
end-March 2013. The current freeze on the basic minimum wage will remain in place during
the program period, and thereafter any adjustments will take account of economic
circumstances, in particular the level of unemployment.
x To reduce non-wage labor costs, we will take a number of actions:
6
Tax wedge. By November 30, 2013, as a new program structural benchmark,
we will adopt legislation reforming the system of social security contributions to:
(i) broaden the base for contributions; (ii) simplify the contribution schedule
across the various funds; (iii) shift funding away from nuisance taxes and onto
contributions; and (iv) reduce contribution rates by an average of 3.9 percentage
points. The reforms will be phased in on January 1, in 2014, 2015, and 2016 and
will be revenue neutral and preserve the actuarial balance of the various funds.
As an intermediate step, by end-September 2013 we will complete actuarial
studies of possible changes and propose an action plan.
Other non-wage labor costs. As a prior action for the review, the government
has adopted legislation to reduce other non-wage labor costs. The changes will
bring Greece closer to EU partners, and include (Annex II): (i) greater efficiency
of labor arrangements within the overall 40 hour weekly limit on working time
(covering the maximum number of workdays, working hours, and shift and leave
restrictions); (ii) a reduction in administrative burden (related to extensive
reporting and preapproval requirements of work arrangements); and (iii) lower
dismissal costs (with grandfathering for existing workers, subject to a cap).
x We will work to strengthen the safety net for those who become unemployed. As
discussed below in the fiscal policy section, the government is enhancing unemployment
benefits to help mitigate any short-term impact that labor market reforms may have. We will
also work to improve the effectiveness of our training and job-matching programs, focusing
on the young and the long-term unemployed (and better leverage any available structural
funds to this end).
x Next steps. As a general principle, we are committed to address any remaining features of
our labor market that fall short of best European practices. As a first step, an independent
assessment of the labor inspectorate will be completed by end-2012, with a particular focus
on effective and efficient control procedures to fight undeclared work. On that basis the
government will specify an action plan to implement procedures to more effectively detect
cases of undeclared work, and to eliminate activities that increase administrative costs for
firms without serving a justifiable public policy objective.
11. In light of the deep problems we have had to date with fully implementing
structural reforms, the government will strengthen its management and
monitoring mechanisms in this area. We will fully staff the directorate of
planning, management, and monitoring of reforms at the [Office of the Prime
Minister] and publish on a quarterly basis monitoring indicators for each reform
initiative on the governments website.
7
C. Privatization
12. It is a priority of the government to restart and invigorate Greeces
privatization program. Greece has been too slow to date in achieving the benefits
this can bring. Shifting government assets to the private sector should improve
efficiency and reduce prices and catalyze needed investment. It will also help to
cover budget financing needs, reduce public debt, and improve market sentiment.
The program in this area covers the identification of assets, their transfer to the
Privatization Fund, measures to overcome obstacles to sales, and measures to
strengthen the institutions executing the work.
13. We have made progress in specifying assets for privatization (Appendix II). The
list includes state enterprises and concessions in gaming, utilities, and infrastructure,
and will also contain bank assets either in possession of the government or to be
acquired during the recapitalization process. These assets have an estimated value of
[26] billion. Further, we have screened 81,000 real estate properties with an
estimated value of [20-28] billion. An updated privatization plan has been
presented to parliament in the context of the 201216 MTFS.
11. The government has taken steps to restart the sales process.
Implementation of selected steps defined in tl |u!!t: |!o ^uux TTT)
`!! | u `o ut`ou o tl v``
x Tuu: o u::t:. Tl l`vut`:ut`ou luud |k^Dl) `!! | _`vu
u!! uud d`t ou:l` o tl uouu! :tut u::t: `u!udd `u
^uux TTT. Tt `!! u!:o | _`vu u!! uud d`t ou:l` o tl
u! :tut u::t: lu::`o`, uud ^uutou, tl ?8 _ovumut
|u`!d`u_: tlut `!! be sold and leased back, and Astir Vouliagmenis. All line
ministries and other relevant entities will provide their property registry to the
General Secretariat for Public Property.
x Legal framework. To enable transactions to proceed without further delays, we
will: (i) remove restrictions to private ownership and control of firms; (ii) create or
extend licenses or amend concession contracts (water companies, State Lottery); and
(iv) initiate the process to obtain the zoning and land planning permits (ESCHADA)
for two real estate projects (Afantou and Kassiopi). As a general principle, upon
privatization of each object, we will amend all statutory provisions (including on
labor relations) to fully align them with private sector law.
x Advisors. We will appoint all the necessary advisors to prepare the assets that are in
the privatization plan for 2012-13.
8
x Tender process. Government stakes in OPAP, the state lottery, and IBC have been
put up for tender.
15. We expect significant further progress in the period ahead: By end-2012, we
will establish regulatory frameworks for airports, the State Lottery, and for ports and
water. Furthermore, Egnatia Motorways will be put to tender; and we will fully
identify and describe 40 new real estate assets that comprise the privatization
projects for real estate lots 2 and 3. These 40 real estate assets will be transferred to
the HRADF by March 2013. We will fully identify and describe all the remaining
assets in the pool of 3150 assets that have been preselected and pre-valued by the
HRADF. We will transfer full and direct ownership of all commercially viable assets
amongst these to the HRADF by end-2013, targeting [250] transfers per quarter
beginning in March 2013. There will be no transfer or withholding of any real estate
assets to entities other than the HRADF, including municipalities and the recently
established pension fund SPV, or other dedicated legal entities, until such time as the
assets necessary to supply the privatization plan have been secured.
16. The government is committed to insulate the privatization process from
political pressures. We are taking steps to strengthen the transparency and
accountability of the HRADF. To this end the HRADF will publish: (i) a semi-
annual update of the Asset Development Plan, which will include a Portfolio
Overview, with a description of the assets it manages for privatization a timeline of
planned tenders and targeted total receipts for the current and next year; and (ii)
quarterly reports on its steps to facilitate privatizations, and financial accounts
(including a profit and loss statement, a cash flow statement, and a balance sheet), no
later than 60 days after the conclusion of every calendar quarter.
17. " luv udu:td ou tu_t: o `vut`:ut`ou od: to !t
ut d!uy: uud tl _uu! dt`out`ou o 0k u::t `:.
" xt `t to tuk mo t`m |youd ?0?0) to u!`: tl u!!
umouut o od: o 0 |`!!`ou, |ut `!! od u: u`k!y u:
o::`|!. " xt, umu!ut`v!y om ]uu ?011), ut !u:t b.b
|`!!`ou tlou_l ?011, 10 |`!!`ou umu!ut`v) tlou_l ?01b, uud ?
|`!!`ou tlou_l ?0?0. " `!! out`uu to mou`to o_:: v`u
uut!y `ud`ut`v vuu tu_t:. In line with these cash targets, we will
refrain from selling assets in exchange for government bonds.
D. Fiscal Policy
18. Tl _ovumut `: dtm`ud to |`u_ tl `:u! d``t to u
:u:tu`uu|! o:`t`ou `u u :o`u!!y |u!uud uud u` muuu. "
mu`u omm`ttd to ul`v u _uu! _ovumut `muy :u!u: o
9
19. Ou `:u! udu:tmut utl lu: |u xtudd to l! :otu tl
`mut o tl ::`ou. Ou v`:d tu_t: o tl _uu!
_ovumut `muy |u!uu `uvo!v u d``t o 1, ut o 0Dl `u
?01?, uud uu vu!yud `movmut `u tl `muy |u!uu
tlut|y 1, ut o 0Dl ul yu to ?01b. In nominal terms, we
expect the overall balance to improve from a deficit of x billion in 2012, to a deficit
of x billion in 2013, to an endpoint [deficit/surplus] of x billion in 2016.
20. The new adjustment path, and different macroeconomic background, has
implications for the amount and phasing of needed measures. Ndd mu:u:
uo umouut to 13 billion during 2013-14, comprising [3] billion to replace
previously agreed measures where yields are declining, and 10 billion in net new
measures. Taking into account a cyclical rebound, and depending on our success
with improving government efficiency, we could need [x-y] billion in measures to
close the gap during 2015-16. The figure for 2013-14 is larger than what we
expected at the time of program approval, reflecting the longer and deeper recession,
as well as delays in implementing earlier measures, and health spending pressures.
Without the extension of the fiscal adjustment period, the measures needed for 2013-
14 would have amounted to an estimated x billion (including y billion in 2013).
?1. Ou udu:tmut :tut_y tu_t: kuou :tutuu! o|!m: `u
tl out`ou: o tl _uu! _ovumut `
x l`:t uud omo:t ud to `mov vuu o!!t`ou: to u:u
the adjustment burden is shared fairly across the Greek population. Thus the
government has adopted a far-reaching tax administration reform strategy, which we
are already implementing, and which is explained in detail in the next section. We
will aim for revenue gains from this source of 1 percent of GDP, the full effects of
which are expected to materialize gradually through 2016.
x Soud!y, tl :tut_y ou:: ou `mov`u_ _ovumut ``uy.
" luv u!udy dud utu! _ovumut out`u_ xud`tu:
ov tl !u:t ? yu:, |ut tl mu`u: :om :o to ut utl,
ut`u!u!y `u tl lu!tl :to. Tl u!:o mu`u `u``u`:
`u tl out ul: o tl _uu! _ovumuttl my`ud xtu
10
|ud_tuy uud:, !ou! _ovumut: uud :tut ut`:: tlut luv
uot u!!y uu_lt u `tl tl udu:tmut ot. Tl`: o:: o
oot`u_ out `u``uy `!! `uvo!v udu:tmut: to tl l`_l !v!
o _ovumut m!oymut.
x Tl`d, tl :tut_y u`m: ut dut`ou: `u :ud`u_ `tm: tlut _
d`:oot`ouut!y `o to tl `:`:. D:`t mu:u: tuku
u!udy, u:`ou: uud :o`u! tuu:: mu`u l`_l |y luouu
:tuudud:. " ud to du tlm to u !v! tlut 0 uu uod
to `uuu `utuu!!y, |ut ud to uvo`d lo`:outu! ut: uud
tu_t ut: to tlo: lo u uot u: vu!uu|!.
x loutl, `utud to :tu|!`:l u mo ``ut tux :y:tm. " ud
to |oudu tl |u: |y !o:`u_ !oolo!: uud udu:t`u_ u!!ouu: `u
u uy tlut u`:: vuu l`! muk`u_ tl tux :y:tm mo u` uud
u`tu|!. We expect this effort to also help our tax collection efforts, by
preventing under-reporting.
22. Building on this strategy, our adjustment package through 2014 focuses mainly
on permanent spending reductions. In 2013, we need to take 9.2 billion of
measures, and we recognize that the reduction of the wage bill, pensions and social
transfers contained in this package (6.3 billion) is essential to its credibility.
Passage of the 2013 budget and updated MTFS will be a prior action for the review,
and adoption of key reforms from those listed in the following bullets will as also be
a prior action for the review (Annex V):
x Public sector wage bill. We aim to reduce the wage bill by [x] billion by 2014:
Public sector employee compensation. We will adjust the wage grid for
special regimes (judges, diplomats, doctors, professors, police, airport personnel,
and general secretaries), with effect from [August 1, 2012]. In addition, with
effect in 2014, we will integrate parliamentary staff into the new wage grid,
reduce the labor costs associated with elected positions, and eliminate seasonal
bonuses and freeze the payment of performance bonuses in the public sector.
Public administration reform. To achieve a leaner more efficient state, we
have initiated a rigorous evaluation of administrative structures and personnel.
We will combine this assessment with mobility, attrition, reduction of temporary
contracts, disciplinary procedures, and mandatory redundancies. This should
help reduce the public sector workforce by 150,000 by 2015, relative to the end-
2010 level, while allowing room to hire staff with critical skills to support
specialized government operations. The key building blocks for this include:
11
o A rigorous assessment. The Ministry of Administrative Reform will
complete a functional review for government ministries, including staffing
plans, by December 2012, and individual staff performance assessments by
end-2013. This reform process will be extended to extra budgetary funds and
regional and local administrations in 2013.This will identify entities to be
merged or closed, staff that are redundant, staff that are not fully qualified for
their positions, and open positions where new staff are needed.
Mobility and exits, Entity closures and cancelation of redundant positions
will be pursued, and all affected employees will be either dismissed or
transferred to the mobility scheme. To facilitate this, new legislation will be
passed to allow mobility in the interest of the service, and we will utilize the
existing legal scheme for mobility and exits (where staff can remain for up to
a year with a reduced rate of pay, substituting for severance, while they are
transferred, retrained, or transition to the private sector). While we will miss
the end-2012 targets to place 15,000 staff in this scheme, we intend to place
at least [5000] general government employees into this program (as a prior
action for the review), and at least a further [5000] per quarter in 2013
(proposed as a new program quantitative performance criteria). To
facilitate renewal of the public sector workforce we expect a large share of
those entering this scheme to ultimately transition to the private sector.
o Hiring controls and plans. To ensure that our efforts to redeploy and
reduce personnel are effective, we will take steps to optimize hiring. We will
limit automatic sources of hiring, by limiting intake into public service
academies, removing job guarantees for graduates of such academies ,
removing job guarantees for private sector teachers, and by putting a sunset
to existing lists of eligible graduates. We will keep our staffing plans up to
date to inform about critical skill requirements. If we are unable to meet our
personnel reduction targets, notwithstanding our hiring controls, we will
increase targeted redundancies.
x Pension reform. Although the recent pension reform addressed long-run issues, short-term
pressures remain high, with pensions still increasing as a share of per capita GDP. We
therefore will take the following measures effective January 1, 2013, which will yield [x]
billion during 2013-14: (i) introduce actuarially-fair rules for lump-sum pensions; (ii)
introduce a progressive reduction in monthly pension incomes above 1000; (iii) eliminate
seasonal bonuses for supplementary and main pensions; and (iv) reduce pension increases
due to automatic wage promotion for those indexed to wages of special regimes. In addition
we will increase the statutory retirement age to 67. As a supporting step, to allow
identification of pensioners total pension income, we will finalize the national registry of
pensions, and sanction funds that do not deliver the required information to this.
12
x Better targeting of social spending. Our social programs are poorly targeted and have
limited impact on poverty levels, and health spending is excessive relative to peers. Our
reform agenda is expected to yield net savings of [x] percent of GDP:
Health spending. We will continue to reduce public
pharmaceutical spending towards 1 percent of GDP, in line with other EU
countries. To this end, we [have activated] the automatic claw-back mechanism
that maintains outpatient pharmaceutical spending within budget limits. In 2013,
we will: (i) expand co-payments; (ii) restrict entry of non-generic drugs in the
positive list and expand over-the-counter products; (iii) further reduce the price
of off-patent and generic drugs; (iv) reduce average profit margins of
pharmacists to 15 percent; (v) reduce hospitals operational spending (and
consolidate and merge underutilized facilities); and (vi) increase contributions by
farmers for their healthcare.
Other social benefit programs. Based on technical assistance
advice, we intend to introduce a well designed income-tested system that will
reduce spending by [x] percent of GDP. Specific measures include: (i) replacing
various untargeted family benefits and allowances with one means-tested family
benefit program; (ii) reducing special and seasonal unemployment benefits for
certain professions and geographic areas; and (iii) increasing the age eligibility
and income-testing of social solidarity supplements.
Improvements in efficiency. Within the central government, we expect to realize
savings from reductions of grants to political parties, rationalization of the operating
expenditures of social security funds, cuts in lower priority investments, and a
general rationalization of the educational system (tertiary institutions). These will
yield savings close to [0.7] billion. We have also cut transfers to public entities
outside the general government, alongside their efforts to reduce wasteful investment
spending. For local governments, a reduction of [0.2] billion is planned, for extra-
budgetary funds, 0.3 billion, and for state enterprises [0.3] billion. These cuts will
be supported by stronger fiscal frameworks (discussed below). Finally, to contain
contingent risks in the energy sector, we will take measures including raising a
solidarity contribution on renewable energy providers.
x Revenue increasing reforms. Changes will cover both direct and indirect taxes:
We [have submitted to parliament] and will enact a reform of the personal,
capital, and corporate income taxation regimes (proposed as a structural
benchmark for end-2012). The reform will target higher collections from
individuals and entities that have paid a disproportionately low share of the tax
burden. To this end, we will increase taxation on the self-employed, broaden the
income tax base by abolishing selected tax credits and allowances and strengthen
13
the taxation of farmers. We will eliminate the top 3 PIT rates and [align the
existing temporary solidarity surcharge], and extend it through [2018]. We will
maintain a single corporate income tax rate and align it with the highest PIT rate.
Finally, we will introduce a flat capital income tax rate to replace the now-
diverse levies on various types of capital income, calibrated to be revenue
neutral. Our tax measures in this area will be designed to yield a net total amount
of [x] billion in revenues.Several reforms of indirect taxes are designed to yield
[y] billion in revenues, including a reduction in the diesel excise subsidy for
farmers; a reduction in tax refunds to farmers; an equalization of the excise for
liquid petroleum gas and diesel for transportation and heating purposes;
restructuring of the taxation of cigarettes in line with EU best practices; and
[introduction of taxes on lottery winnings]. We will consult with the
EC/ECB/IMF on any proposed changes in tax rates or bases.
23. To cushion the impact of our fiscal adjustment on the most vulnerable, we have
strengthened social spending programs. Support for the unemployed will be
increased by 55 million by 2014, through two new programs (now being piloted):
(i) an income-tested benefit scheme that targets long-term unemployed and provides
income payable for a year; and (ii) a minimum income guarantee scheme targeting
families in areas with difficult socioeconomic profiles. We will also expand our job-
training and job matching programs, to be financed where possible by better
leveraging available EU structural funds.
24. We have specified a strategy to fully achieve our 4 percent of GDP primary
surplus target by 2016. We expect revenues to revive once the economy enters its
recovery phase, and we anticipate gains from stronger revenue administration (as
noted above). Our drive to improve government efficiency will also continue, and
we expect to achieve savings from a series of additional spending reforms designed
to eliminate government waste (including increasing revenues of state-owned
enterprises, contracting out local government services, and eliminating ineligible
pension and social benefits recipients through data cross-checks). To the extent that
a fiscal gap remains, there are several strategies that we could pursue to close this,
including [authorities to specify areas they could target to achieve savings or
raise revenues].
25. We are committed to deliver our fiscal targets but stand ready to adjust if we
over or under-perform, or if cyclical conditions change. If in future our tax
administration reforms and government restructuring do not deliver the expected
dividends and new measures prove necessary, we will[specify mechanism for
automatic expenditure cuts]. The cuts would focus on additional targeted reductions
in the public wage bill and pension expenditures. In the event of over-performance
that is projected to be sustained, we would adjust our budgetary ceilings, with a
particular focus on helping low-income earners, and supporting Greeces recovery.
14
In this event, we may also make our intermediate deficit targets more ambitious to
achieve our medium term objective earlier and accelerate debt reduction.
E. Fiscal Institutional Reforms
26. Strengthening fiscal institutions is a crucial part of the governments reform
program. Chronic nonpayment of taxes has eroded the fairness of the system, forced
high tax rates and additional expenditure rationalization. Meanwhile, the public
sector has failed to pay its bills and tax refunds on time, driving up procurement
costs and damaging corporate sector liquidity. The reform efforts undertaken to date
have yielded only limited results, and we are committed to boosting them, while
recognizing that it will inevitably take time for benefits to be fully realized.
27. We are committed to markedly reduce tax evasion. To help accomplish this, we
intend to build an independent revenue administration with a modern operating
structure and methods. Implementing selected key reforms (Annex VI) outlined in
the bullets that follow will be a prior action for the review:
x We will appoint a new Secretary General of the tax administration by [date].
We will pass legislation to define the role and qualifications of the Secretary
General. Concerning qualifications, this will be a person with senior management
experience, expertise in tax matters, and an impeccable reputation (including a
strong tax compliance history). We will also pass interim legislation, and the
Minister of Finance will use this to delegate decision making powers to the Secretary
General. These powers will include the competence to make operational decisions,
direct and control local offices, manage human resources, replace underperforming
senior managers, manage the budget of the tax administration, and manage all
information with due confidentiality.
x Establishment of independence. Legislation to establish the new semi-autonomous
tax agency will be adopted by parliament by end-February 2013 (structural
benchmark). This will specify the degree of autonomy, legal powers of the head of
the administration, governance framework, the relationship framework with other
agencies (including the Financial Intelligence Unit (FIU)), the framework for the
receipt and use of information by the tax administration (including controls against
sharing confidential operational information with the Minister of Finance),
accountability, and initial staffing of the organization. The agency will become
operational in March 2014.
x l:tu|!`:lmut o ky uut`ouu! uu`t:. We will make fully operational key
enforcement areas, by: (i) transferring 100 experienced auditors to the large taxpayer unit;
and (ii) by establishing one functional unit, with at most two locations, responsible for high-
wealth individuals (and transferring 50 experienced auditors to it). We will also strengthen
15
collection functions by establishing specialist debt management units in larger local tax
offices and allocating at least 10 percent of local staff to this function by end-2012.
x ou:o!`dut`ou o tux udm`u`:tut`ou out`ou:. " `!! !o: uud m_
10 :mu!! !ou! tux o`: |y udHul ?013. by ud]uu ?013, u|out 1?0
uut`ou`u_ o`: `!! mu`u. Tl u!! !`:t o o`: to | !o:d
`!! | u|!`:ld |y udDm|. " `!! tlu utu!`: uud ou:
uud`t, `!`u_ uomut, uud d|t muuu_mut o :mu!! uud md`um
tuxuy: `u tl !u_:t tux o`: uud ou u _`ouu! |u:`:. Tl
mu`u`u_ o` utok `!! | u:tom :v` ut:, `tl uo uud`t
uud uomut uut`ou:.
x Simplifying procedures and record keeping. We will repeal the Code of Books and
Records and adopt a simpler set of accounting and record keeping rules by end-2012. To
reduce the costs of administration and compliance, by end-June 2013 we will also adopt a
new Tax Procedures Code (structural benchmark). This will incorporate procedural
reforms in all major administrative areas that are necessary to support modern tax
administration (e.g., tax filing, audit and penalties, enforcement powers and debt collection).
It will also incorporate a new streamlined administrative dispute resolution process.
x Upgrading personnel. We will increase the number of staff devoted to audit by 2,000 by
June 2013, by: (i) hiring 200 externally by [end-March 2013]; and (ii) by admitting staff
with audit experience and selecting other qualified staff following interviews. Candidates
will, on a selective basis, be subjected to an audit of their assets. The head of the tax
administration, once appointed, will set appropriate performance targets for the formal
grading of all auditors, and introduce twice-yearly performance assessments. Temporary
annual contracts will provide for [new] auditor staff to be terminated upon failure to achieve
the targets.
x Introduction of an effective anti-corruption framework. We will publish our anti-
corruption plan on [date before mid-November]. To immediately begin to implement it, we
will pass legislation to overhaul personnel management (including procedures for rotation of
staff in sensitive positions). By end-2012, we will adopt a code of conduct for the tax
administration (including rules about conflicts of interests and declaration of interests), and
a system to facilitate transparency and reporting of misconduct, protect whistle blowers, and
centralize the decision on disciplinary actions in the internal affairs unit. By end-March
2013, we will define measures to ensure continuous monitoring of the implementation of the
code of conduct.
x Improvements in operating procedures. To allow us to focus our resources where they
will yield the greatest dividends and facilitate a risk based approach to auditing, we will
legislate the removal of the requirement that all tax declarations for the previous 10 years
16
must be audited (while retaining the right to continue to audit earlier years and the discretion
to audit any amount of declarations from these earlier years). We will also expand the
sources of third party information used in assessments. The tax and AML laws will be
revised to: (i) enable the central authority in charge of revenue administration to be
informed of all the cases sent by the FIU to local tax offices and to the Corps for the
Prosecution of Financial Crime; and (ii) to provide that relevant information on large cases
of failure to pay confirmed debt shall be transmitted to the FIU.
x Fiscal identification number. By June 2013, we will require that all Ministries which have
a fiscal relationship with taxpayers utilize their identification number for financial
transactions with them. Looking further ahead, by June 2014 we will introduce a central
agency to consolidate and link all of the different identification numbers now employed
across various government agencies.
x Accountability to the public: We will launch an easily accessible website by end-2012
which will publicize, on a monthly basis, information enabling the public to be informed
about the tax debt assessed and recovered. It will include summary statistics on key
performance indicators, including on tax evasion cases sent to the FIU and to prosecution by
the tax administration.
28. Parallel to our work with the revenue administration we will work to improve
the collection of social security contributions. We [have finalized] a reform plan to
modernize collections, with a focus on boosting revenue and recovery, overhauling
business processes, performance standards, and inter-agency relationships, and
improving the reporting of information that is needed for validating payments and
administering benefits. The plan also defines phases for consolidating collections,
and eventually integrating them into the tax administration. We [have established] a
working group between the Ministry of Labor and the Ministry of Finance to
advance the reform. As a first step, by Q1 2013, we will also review penalties and
sanctions to ensure that they sufficiently deter evasion and fraud.
29. The government will not introduce any new amnesties or incentive schemes to
collect tax arrears or social contributions. In this context, the PIT installment
scheme introduced in 2012 will remain a one-off arrangement to smooth out the
liquidity impact on households of the recently introduced PIT and solidarity charge
measures, and we will not extend the deadline for the existing social security
amnesty. However, we will rationalize the existing debt payment arrangement
system by tightening the criteria to determine ability to pay and targeting only
taxpayers under temporary financial stress, but with a good compliance history and
reasonable prospects of business viability.
30. The government is determined to secure tighter control over all general
government spending and to prevent the accumulation of arrears. Our strategy
17
focuses on improved budgeting, stricter controls on expenditure commitments, and
better fiscal reporting and monitoring:
x Budgeting and fiscal framework. To further streamline and strengthen the preparation
process, we will issue a circular by end-February 2013 regulating the calendar, deadlines,
and the role of all institutions in formulating the next MTFS (201417) and the 2014 budget.
We will also further develop our fiscal framework to: (i) introduce and make operational a
domestic stability pact for local governments; and (ii) establish a system to agree with state-
owned enterprises (within the general government definition) on monthly budget targets and
on sanctions for non-observance of targets. We will adopt the necessary legislation by end-
2012. Finally, to ensure independent oversight of the budget process, we will operationalize
the parliamentary budget office.
x Spending controls. Establishing commitment-based spending controls remains a key
milestone toward preventing overspending and accumulation of domestic arrears at different
levels of general government. To this end:
x Commitment registers. As a prior action for the review, we will ensure
that EOPYY reports from its commitment register through the e-portal for at
least two consecutive months (retroactive reports included). By [end-2012],
we will ensure that commitment registers will be in operation in 90 percent
of general government entities (with all commitments recorded into the
register at the moment they are made, and all columns of the register
complete and reconciled). By March 2013, we will also expand the scope of
data captured by the General Accounting Offices e-portal to include the
whole expenditure cycle. The Ministry of Finance will continue to monitor
the effectiveness of the commitment registers by conducting targeted
inspections in the public entities covered by the system.
x General Directorates of Financial Services (GDFS). We [have issued] a
joint ministerial decision to implement GDFS in all line ministries and thus
unify all financial services functions under the recently appointed accounting
officer. Moreover, by [end-2012] a [Presidential decree] will specify the
financial authority and powers of accounting officers in discharging their
responsibilities. Thus by [end- 2012] all line ministries will have established
a well-structured and functional GDFS solely responsible for managing and
supervising all financial functions, including: preparation of the ministrys
MTFS and budget proposals; consolidation of budgets of supervised entities;
and monitoring and reporting of the ministrys budget execution.
x Fiscal reporting. We remain committed to further improving the quality of fiscal reports. In
this regard: (i) we have established a new Social Budget Monitoring Committee to improve
the fiscal surveillance of the social security and health sectors, which has begun monthly
18
monitoring of the social budget against fixed quarterly targets. By end-2012 the committee
will introduce a comprehensive budget monitoring framework, including improved
reporting and control systems of EOPYY and hospital budgets; and (ii) by end-March 2013
we will verify and validate the quality of the detailed fiscal data collected from a recent pilot
project before expanding it to all significant general government entities.
31. The government will clear domestic arrears as quickly as feasible to help
improve liquidity. The conditions which a government unit must meet to allow
funds for arrears clearance to be disbursed will include: (i) verification of arrears
claims (by fiscal audit units and the court of audit); (ii) establishment by the unit of a
fully functioning commitment register; and (iii) reporting of at least three months of
consistent data on commitments, payments, and arrears. We will ensure that
subvented agencies which meet these conditions can clear their arrears even if their
parent agency does not meet the conditions. We will ensure that arrears do not delay
the execution of the pharmaceutical spending clawback. Once we achieve the
clearance of all verified arrears, we will at that point commence a targeted audit of
general government entities accounts payable, to verify whether arrears remain and
to identify any entities that did not properly comply with the conditions set for
clearing arrears (completion of the audit will be a structural benchmark for end-
December 2013).
32. We will strengthen monitoring of off-balance sheet activities. We will establish
by [June 2013] a system for monthly financial reporting by state-owned enterprises
(SOE) currently outside the general government. Furthermore, we will set conditions
under which the right of such SOEs to receive any new general government transfers
or loans will be contingent on the adoption of structural measures to restore financial
soundness, including through spending cuts and fee increases in consultation with
the supervising ministry and the MoF.
33. We will continue to monitor implementation of our fiscal institutional reforms
via quantified indicators. We propose two new structural benchmarks for end-
June and end-December 2013 covering achievement of revenue administration
indicators, including audit targets. We propose a new structural benchmark for
end-June 2013 covering achievement of public financial management indicators,
including implementation of spending controls across line entities. The attached
Technical Memorandum of Understanding provides details on the quantity targets.
19
20
Table 1. Greece: Quarterly Performance Criteria and Indicative Targets (2012-16 Program)
(billions of Euros, unless otherwise indicated)
[Insert table]
21
Table 2. Greece: Structural Benchmarks under the EFF
Measure Macro critical relevance Status
End-March 2012
1. A ministerial decree shall be issued to provide the technical details of the banks'
recapitalization framework
To strengthen financial sector Completed with delay as
prior action for 1
st
review
2. Bank of Greece to complete a strategic assessment of banks business plans To strengthen financial sector Completed with delay
End-June 2012
3. Government to adopt a budget-neutral tax reform package, including: (i) the repeal of
the Code of Books and Records and its replacement by simpler legislation; (ii) the
elimination of several tax exemptions and preferential regimes; (iii) simplification of the
VAT and of the property tax rate structure; (iv) a more uniform tax treatment of capital
income; and (v) a simplified personal and corporate income tax schedule.
To simplify the tax system, improve
its efficiency, and broaden the tax
base
[Not observed]
4. Government to complete the review of social spending programs to identify 1 percent
of GDP in savings, while at the same time making proposals to strengthen safety net.
To help achieve medium-term fiscal
targets
[Completed with delay]
5. Government to complete the reviews of public administration to identify 1 percent of
GDP in savings
To help achieve medium-term fiscal
targets
[Completed with delay]
6. Government to meet quarterly performance indicators for revenue administration To improve tax collection [Not observed]
7. Government to meet quarterly performance indicators public financial management. To contain arrears [Not observed]
End-September 2012
8. Government to complete the strategy for strengthening social security collections To improve social security collections [Completed with delay]
9. Government to adjust pensions, with protections for low income pensioners, and the
social security contribution base, to permit a fully funded reduction in rates (cumulatively
5 percent from January 1, 2012)
To improve unit labor costs and
competitiveness
[Not observed]
22
Table 3. Greece: Prior Actions
Measure Macro critical relevance
Structural
1. Government to take measures to liberalize key product and service markets (Annexes I.1-I.3).
2. Government to adopt measures to enhance labor markets including by establishing a timetable to overhaul the
setting of minimum wage, and by reducing labor market exit costs and non-wage costs (Annex II).
3. Government to adopt steps to strengthen the institutional framework for privatization, transfer ownership of
assets to the Privatization Fund balance sheet, and eliminate legal obstacles for privatization (Annex III).
Financial
4. Government and Bank of Greece to communicate capital needs to banks, and request that they finalize the
process by end-April 2013.
5. Government and Bank of Greece to finalize the design of the program for bank recapitalization and resolution
and communicate this to banks.
6. HFSF to take steps to strengthen governance in the financial system (Annex IV).
Fiscal
7. Government to adopt and publish the 2013 budget and the medium-term fiscal strategy (2013-16)
8. Government to enact and implement measures needed to reach the 2014fiscal deficit targets (Annex V).
9. Government to implement measures to strengthen the tax administration (Annex VI).
10. EOPYY to report, using commitment registers, [2] consecutive months of fiscal data.
To strengthen competitiveness and
promote employment.
Maintain financial sector stability.
To help restore fiscal sustainability.
23
Table 4. Greece: Existing and Proposed Structural Benchmarks
Measure Macro critical relevance
End-December 2012
1. Government to meet quantified quarterly performance indicators for revenue administration
2. Government to meet quantified quarterly performance indicators for public financial management
3. Government to complete the screening and cleaning of existing legislation covering the list of professions
and economic activities covered in Annex II of KEPEs Second Report on the Impact of Liberalizing
Regulated Professions
4. TT bank to be resolved with the transfer of its good assets, all deposits and ECB/ELA financing to a core
bank (via P&A), and weak assets to be left in a bad bank (xx). [Proposed]
1. Adopt legislation reforming the Income Tax Code, that will: (i) increase taxation on the self
employed by increasing the information to be applied in the presumptive taxation and the tax rate
to be applied; (ii) broaden the tax base by eliminating insurance, mortgage interest, and rental tax
credit under the PIT; (iii) eliminate the top 3 personal income tax brackets above 35 percent and
[align the existing temporary solidarity surcharge], and extend it through [2018]; (iv) maintain a
single corporate income tax at a flat rate of 35 percent and align it with the highest PIT rate; (v)
eliminate the imputed income taxation for farmers and introduce income taxation at a rate of 6
percent based on actual income according to books and records; and (vi) increase the tax on bank
deposit interest from 10 percent to 15 percent (to take effect in 2014
x Fiscal sustainability (revenue)
x Fiscal sustainability (budget)
x Growth/competitiveness
x Financial stability
x Fiscal sustainability (revenue)
End-February 2013
5. Adopt a law establishing a new semi-autonomous tax agency, which will specify the degree of
autonomy, the governance framework, accountability, and initial staffing of the organization (xx).
[Proposed]
x Fiscal sustainability (revenue)
End-April 2013
6. All 4 core banks to meet the capital requirements set by the Bank of Greece. (xx). [Proposed]
7.
x Financial stability
x
End-June 2013
8. Government to meet quarterly performance indicators for revenue administration (xx). [Proposed]
9. Government to meet quarterly performance indicators for public financial management (xx). [Proposed]
10. Adopt a new Tax Procedures Code to harmonize, simplify and modernize tax procedures (xx). [Proposed]
11. Complete resolution of all undercapitalized or insolvent non-core banks (xx). [Proposed]
x Fiscal sustainability (revenue)
x Fiscal sustainability (budget)
x Fiscal sustainability (revenue)
x Financial stability
End-July 2013
12. Banks to update their restructuring plans and submit them for validation by DG-Competition (xx).
[Proposed]
x Financial stability
End-September 2013
13. Ministry of Finance to produce a comprehensive list of nuisance taxes and levies, and eliminate them or
transfer them (and the associated spending) to the central government budget (xx). [Proposed]
x Growth/competitiveness
(business environment)
End-November 2013
14. Adopt legislation to reform the system of social security contributions to: (i) broaden the contribution base;
(ii) simplify the contribution schedule across the various funds; (iii) shift funding away from nuisance taxes
and onto contributions; and (iv) reduce contribution rates by 4 percentage points. The reforms will be fully
phased in by January 1, 2015 and will be revenue neutral and preserve the actuarial balance of the various
funds (xx). [Proposed].
x Growth/competitiveness
(business environment)
End-December 2013
15. Government to meet quarterly performance indicators for revenue administration (xx). [Proposed]
16. Bank of Greece to complete a follow-up stress test for all banks based on end-June 2013 data, using a
methodology designed in consultation with the EC, ECB, and the IMF, and to update banks capital needs
on this basis (xx). [Re-phased from end-June].
17. Ministry of Finance to complete a special audit of general government accounts payable, to verify whether
any arrears remain, and to review compliance with the conditions set for clearing arrears (xx). [Proposed].
x Fiscal sustainability (revenue)
x Financial stability
x Fiscal sustainability (debt)
25
Annex I.1: Product Market Actions
Fuel market
x Allow independent gas stations to own and operate tanker trucks above 8 tons, and use any tanker size to
pick up (imported) fuels, provided that safety standards for the transportation of fuel are respected.
x Allow gas stations to hire a public use tanker for fuel transportation without needing to qualify for their
own private use tankers.
x Pass law and issue two MDs to implement fuel storage directive 2009/119/EC, which provides the legal
framework for a central fuel storage agency and buying certificates in other member countries. Also allow
fuel retailers to contribute a fee toward the national fuel reserve instead of maintaining their own physical
storage.
x Issue technical specification and set the timetable for the implementation of the input-output measurement
system in all fuel stationswith a deadline for Athens and Thessaloniki region of March 2013, other large
cities by September 2013, and the rest of the country by March 2014.
x Issue the implementing MD on GPS systems in fuel trucks, to be effective end- 2012.
Retail market
x Allow sale in supermarkets of pre-packaged food products, including meat, seafood, cheese and
charcuterie.
x Allow sale in grocery stores of non-food products, including infant milk, tobacco, newspapers, and
magazines.
x Allow mixed shops to sell goods other than food, subject to hygiene and food safety standards.
x Eliminate all restrictions on minimum space requirements for sale of food products
x Allow a delink of the working hours of all employees in establishments (as defined in Law 1037/1971 and
related implementing legislation) from opening hours of the establishment.
x Adjust the law to clarify that shift breaks are allowed in all retail establishments (including those with
continuous working schedule).
Transportation
x Remove restrictions on rental of pickup trucks, vans and chauffeur services.
x Allow shuttle services by hotels and tour agencies using small vehicles (less than 12 seats) and tour
packages for small vans and off-terrain vehicles
x Amend maritime employment Law 3276/1944 to allow firm-level labor agreements and temporary
contracts in the domestic ferry industry.
x Restrict obligatory ticket discounts for ferry service only to [disabled persons, retirees, children and
students].
x Remove requirement that vessels must be manned for periods outside their minimum routing obligations.
x Limit the period for pre-approval by Ministry of Shipping of changes in timetables and vessel size for
ferry services to [1-month], subject to minimum service standards.
26
Annex I.2 Regulated Professions Actions
Liberalization of professions/economic activities covered in previous reviews:
x Stevedores for land operations: Repeal fixed fees for loading/unloading services; remove
the Stevedore Work Regulatory Committee from acting as licensing authority.
x Sworn-in valuers: Eliminate minimum fees, the numerus clausus, and the nationality
requirement; allow legal entities to practice the profession; and open areas reserved in
exclusivity to sworn-in valuers.
x Accountants and tax consultants: Clarify that professional identity cards (IDs) will be
issued automatically within 3 months; issue indefinitely valid IDs; and clarify that SAEP is
responsible for the recognition of professional qualifications.
x Temporary employment agencies: Abolish the requirement for minimum number of
employees. Allow the provision of consulting and training activities.
x Private labor consultancy offices: Allow employees other than the Director to carry out
mediation activities; and eliminate the requirement for minimum office space and technical
equipment.
x Lawyers: Eliminate minimum wages for private sector salaried lawyers (except trainees).
Repeal provisions requiring the mandatory presence of a lawyer for legal transactions
before a notary, and allow other legal professions to conduct title deed searches.
x Real estate brokers: drop the probationary period for real estate brokers.
x Tourist guides: Eliminate restrictions that prohibit individuals from serving as tourist
guides unless they have a specialized education.
x Actuaries: discontinue current practice of Hellenic Actuarial Society to determine
indirectly the number of successful candidates in the examinations.
27
Annex I.3 Regulated Professions Actions
Remove the following restrictions on the following professions/businesses:
x Stevedores at ports: simplify authorization procedures, repeal fixed fees for loading and
unloading services; and allow stevedores to be employed under private sector law.
x Customs brokers: repeal minimum fees; lift geographical restrictions, nationality
requirements, and age limit; allow legal persons to represent others at customs, allow all
natural and legal persons to complete custom formalities without employing services of a
custom broker; and remove the need to renew the custom broker license every year.
x Kiosks and cantinas in public buildings: remove restrictions for licenses in favor of
particular groups.
x Tourist offices: eliminate prior authorization scheme, minimum office space requirements,
and bank guarantees.
x Private education establishments: Remove restrictions to private education consistent with
the opinion 20/VI/2012 of the Hellenic Competition Commission.
x Private providers of primary care services: Amend sector specific law to eliminate
inconsistencies with the 2011 law on professions.
x Electricians: Reduce number of specialties, and increase mobility of electricians within the
same level category.
x Press distribution agencies: Remove prior authorization scheme; and expand the number of
economic activities carried out.
x Energy inspectors: remove minimum fees, amend sector specific law to repeal minimum
fees for energy inspection services, simplify licensing and open profession to holders of
related university degrees.
28
Annex II: Labor Market Actions
Setting of minimum wage
x The government will establish a timetable to reform Greeces minimum wage.
Under the new framework, the basic minimum wage and the maturity and marital
allowances currently set in the national general collective agreement will be replaced
by a minimum wage mechanism legislated by the government after consultation with
social partners and other stakeholders and independent experts. This system, which
will become effective by end-March 2013, will include a single-rate statutory
minimum wage as a legally binding floor, and the legally-binding maturity
coefficients and allowances linked to the minimum wage will be phased out by
[April 2015], with the first step to become effective at end-March 2013. .
Non-wage labor costs
x Concerning dismissal costs, the government will [action] to reduce the notification
period to 3 months and cap minimum statutory severance pay at 12 months (while
preserving the existing link between tenure and minimum severance for tenures
below the cap). If the cap has already been surpassed on the date of the reform the
amount accrued will be grandfathered, but with the amount beyond 12 months
subject to a cap of 6 times the national monthly minimum wage. In addition, to
secure equal and fair treatment for all employees and occupations, in those where
severance costs set by law are in excess of the rule just described, the compensation
for severance will be aligned with the rule just described.
x The Ministry of Labor will reduce administrative burdens by [action] to
eliminate the requirement for ex-ante submission of work schedules to labor
inspectorates and removing preapproval by labor inspectorates of overtime work
(except for preapprovals for underage workers).
x The government will increase work efficiency, within the overall limits of the work
week (40 hours), by: (i) allowing on a contractual basis agreements on compensatory
work time arrangements between the employee and employer outside of the context
of collective agreements; (ii) applying the general rules on the number of maximum
workdays to sectors not now covered by the general rules; (iii) resetting the
minimum daily rest to 11 hours; (iv) allowing the consecutive two week leave
requirement to be taken anytime during the year in seasonal sectors.
29
Annex III. Privatization-Related Actions
Strengthen institutional framework for privatization
x Government to present an updated privatization plan to Parliament with the 2012-16 MTFS.
x HRADF to publish a semi-annual update of the Asset Development Plan, which will include a portfolio
overview with a description of the privatization assets, a timeline of planned tenders and targeted total
receipts for the current and next year.
x Amend paragraph 3 article 16 of the Articles of Association of the HRADF in order to stipulate that the due
cause required for substituting members of the Board of Directors is defined in particular by the undue
suspension or by the intentional compromising of the objectives of the HRADF with acts or omissions of its
Board members.
x Amend Law 3986/2011 to require publication of quarterly reports of the HRADF on activities and financial
accounts, including a detailed profit and loss statement, cash flow statement, and balance sheet, within 60
days of the end of each quarter.
Transfer ownership of assets to the Privatization Fund
x Transfer to the portfolio of privatization assets of the HRADF the full and direct ownership (shares or
concession rights) of: Egnatia Motorways, the regional ports of Elefsina, Lavrio, Igoumenitsa,
Alexandropolis, Volos, Kavala, Corfu, Patras, Heraklion, and Rafina.
x Sign contract between the HRADF and MoF for the use of the voting rights for ELVO.
x Issue a Ministerial Decision that secures that the proceeds of the sales of the Digital Dividends are
transferred to the HRADF.
x Line ministries/government entities to provide the General Secretariat of Public Property with full access to
the inventory of all real estate assets owned by the State.
Eliminate legal obstacles for sale of assets
x Amend/repeal statutory provisions of companies that diverge from private company law (PPC, OLP and
OLTH port authorities, HELPE, EYATH and EYDAP, ports, etc.), including any restrictions on voting
rights of private shareholders.
x Launch ESCHADA process (issue environmental study) for Afantou and Kassiopi.
Advisors/Tenders
x Launch tender for the appointment of advisors, consistent with existing procurement rules, for EAS, ELVO,
South Kavala Natural Gas, Trainose.
30
Annex IV. Actions to Strengthen Financial Sector Governance
x The HFSF will complete a due diligence of core banks. This will include a review of
governance, such as loans to related parties, asset quality, and risk concentration and
any findings of interest to the supervisor will be communicated to the BoG. These will
be addressed promptly, including removal of board members and managers, and/or
suspension of private shareholders (which would prevent them from participating in
bank recapitalization framework),
x The HFSF will communicate a terms of reference for bank monitoring trustees to the
banks, with instructions for the trustees to begin work no later than [mid-January
2013].
x Amend HFSF by-laws to clearly stipulate that the HFSF Board, including the
observers, must be informed of all decisions of the core banks having an impact on the
HFSFs rights as a shareholder/investor, as soon as received by and through the senior
executive of the HFSF, and a minimum [1] day in advance..
31
Annex V. Fiscal Measures
Public sector wage bill:
x Adopt legislation to reduce monthly wages of employees under special wage regimes (excluding
Christmas, Easter and summer bonuses), effective [August 1, 2012], with the following marginal
reduction schedule: 2 percent for wages below 1000; 10 percent for 1000-1500; 20 percent for 1500-
2500; 30 percent for 2500-4000; and 35 percent for wages above 4000.
x Adopt legislation to reduce the State wage bill by 151 million in 2013 and additional 34 million in
2014, including by reducing the allowances for employees serving abroad (by 43 million in 2013),
reducing the wage bill for consultants (by 11 million in 2013), and introducing a hiring freeze at the
Ministry of Citizen protection.
x Adopt legislation to introduce a new wage grid for special regimes, including for parliamentary staff,
yielding savings of 14 million in 2013 and an additional 194 million in 2014.
x Adopt legislation to eliminate the public sector seasonal bonuses of employees at the state and local
governments, and at legal entities of public and private law, to produce savings of 424 million in 2013.
x Place [5,000] civil service employees into the mobility and exit scheme.
x Adopt legislation to abolish all exemptions from the public sector wage grid reform introduced in
2011, reducing expenditure by 15 million in 2013.
x Adopt legislation to suspend, through 2016, the fiscal bonus of public sector employees, saving 13
million in 2013 and an additional 66 million in 2014.
x Adopt legislation to suspend, through 2016, the performance bonus of public sector employees,
saving 36 million in 2013 and an additional 178 million in 2014.
x Adopt three bills that: (i) permit the mandatory depositions of teachers from one region to another;
(ii) merge school units; and (iii) move administrative staff from the rest of public sector to the Ministry of
Education. Upon adoption of the bills, issue a ministerial decision to reduce the number of non-permanent
teaching staff annually from 15,226 to 2,000 teachers.
x Reduce the limit on the number of non-permanent teachers by 90 percent in university and technical
colleges (under the implementation of the plan "Athena").
x Adopt legislation to reduce the local government wage bill by 75 million (to take effect in January
2013)
x Extend the 1:5 hiring rule for the general government through 2016.
x Adopt legislation to align the wage grid of all state-owned enterprises in Chapter A with the new
wage grid for state employees reducing average wages to no more than 1900 per month (including all
social security contributions, allowances, overtime and non-wage benefits), effective January 1, 2013.
x Adopt legislation that provides mandatory staff transfers (horizontally and vertically) within the
general government and from one region to another;
x Issue MD to limit intakes into professional academies to a total of [500] per year, and remove the job
guarantee after graduation. Adopt legislation that all hiring offers from ASEP expire after three years if
32
the actual hiring has not taken place.
x Repeal the provision that provides a full pension to government employees with 20 years of service in
case of service in case of layoff.
Pensions
x Increase the retirement age by 2 years, with effect as of January 1, 2013. The increase will be applied
to the statutory retirement age (and any other retirement age for special groups). This increase will not
affect the fulfillment of the full pension entitlement at 40 years.
x Reduce, as of January 1, 2013, new lump-sum benefits by 23 percent for public employees who
received lump-sum pensions and introduce a 3-percent tax on main pensions of public retirees who have
already received their lump-sum pensions within the 15 years prior to 2010.
x Ministry of Finance and the Ministry of Labor to issue a joint Ministerial decree to introduce a
pension register by December 2012. The decree will require that SSFs submit pension data to the entity
managing the register by the 10
th
of each month to aggregate each pensioners main and supplementary
pensions, and note that payments to funds will be withheld for non-compliance with data submission
requirements.
x Adopt legislation to implement, using the pension register, the following pension reductions as of
January 1, 2013: (i) reduce the overall monthly pension incomes (main and supplementary pensions) per
pensioner between 1000-1500 by 3 percent; 1500-2000 by 5 percent; and above 2000 by 12 percent
(respecting a no re-ranking rule); (ii) for special wage regimes, apply a cut equivalent to the cuts to wages
in special wage regimes.
x Further rationalize pensions by: (i) eliminating all seasonal bonuses of supplementary and main
pensions; (ii) means-testing pensions for unmarried daughters that were entitled to a pension before the
3865/2010 Law; (iii) eliminating special pension benefits of trade unionists; and (iv) using completed
cross-checks to abolish ineligible pension benefits in 2013.
Social benefits
x Adopt legislation to reduce and target pension benefits for uninsured individuals according to whether
the beneficiaries rent or not their own dwelling (cut of 50 to owners and 30 to non-owners), aiming to
achieve savings (net of income taxes and social security contributions) of 13 million in 2013 and
additional 13 million in 2014.
x Adopt legislation to replace existing family benefits with a targeted benefit, reducing spending by 86
million in 2013; and eliminate income tax allowances on 2012 income with the aim of achieving an
annual saving of 399 million in 2013.
x Issue a Ministerial decree to restructure the transportation reimbursement scheme for selected
categories of patients to equalize the benefits to the 2009 level.
x Issue a Ministerial decree to eliminate seasonal benefits for workers in industries with seasonal
employment patterns as to generate annual saving of 70 million starting from 2013.
x Adopt legislation to reduce unemployment benefits targeted to specific geographical areas to achieve
33
savings of 20 million in 2013.
x Adopt legislation to eliminate the special benefits given to people unemployed because of mergers, to
generate annual savings of about 10 million starting from 2013.
x Adopt legislation to target assistance pensions provided by EKAS to persons above 64 years, as to
generate savings of 115 million starting from 2013
x Adopt legislation to close two programs for the economic support of farmers, to achieve savings of
25 million in 2013.
x Adopt legislation introducing new social programs, including:
Benefits equal to 200 per month payable for up to 12 months to long-term unemployed who exhaust
the full length of unemployment benefit (12 months), provided they do not qualify for other training
schemes and have family taxable income up to 10,000, with expenditure cap of 35 million.
A Minimum Income Guarantee scheme applied in two pilot areas of the country with different
socioeconomic profiles, with an expenditure cap of 20 million.
Health
x In order to reduce outpatient pharmaceutical spending in 2012 the government will:
Take measures to ensure that the outpatient pharmaceutical expenditure does not exceed 2.88 billion
in 2012 (in commitment terms, net of the structural rebates and of the claw-back). Either: (i) activate
and collect the proceeds through September 2012 from the automatic claw-back mechanism; or (ii)
impose the entry-fee onto the positive list; or (iii) apply across-the-board price cuts.
Set, through a Ministerial decree, the new by-monthly claw-back threshold for 2013, ensuring an
annual ceiling of 2.4 billion for outpatient pharmaceutical spending, including VAT.
Repeal the current provisions of the law which hamper the collection of the rebate from pharmacies in
case of delays in payments on the part of EOPYY.
Revise the co-payment structure for medicines to exempt from co-payment only a restricted number
of [x] medicines related to specific therapeutic treatments.
Reduce the price of patented medicines, based on the three EU countries with the lowest prices and
re-price medicines now cheaper than 10, including implementing a 10 percent price reduction in the
prices of these medicines and issue the quarterly price list update;
Extend the application of the 9 percent rebate on pharmaceutical companies (which exists for
outpatient and hospital medicines) to the expensive products sold in EOPYY pharmacies.
Update the positive list of reimbursed medicines to reimburse only the cost effective packages for
chronic diseases, by moving [x] medicines from the positive to the negative and OTC lists and
introducing the reference price system developed by EOF.
x Modify the form for e-prescriptions to make it compulsory for physicians to prescribe only by
international non-proprietary name for an active substance, rather than the brand name.
x Issue a ministerial decision requiring that pharmacies substitute prescribed medicines by the lowest
priced product of the same active substance in the reference category by pharmacies (compulsory "generic
substitution").
34
x To improve the current financial situation of EOPYY and ensure that the budgetary execution is
closer to a balanced budget in 2012 and 2013, adopt legislation, with immediate effect, to:
Restrict the benefit package;
Increase cost-sharing for private care;
Negotiate price-volume agreements with private providers;
Revise the fees for and number of diagnostic and physiotherapy services contracted by EOPYY to
private providers with the aim of reducing related costs by at least EUR 80 million in 2013.
Introduce a reference price system for reimbursement of medical devices
Progressively increase the contributions paid by OGA members to the average of those paid by other
members of EOPYY.
[Action] to implement higher hospital copayments and realize savings of 160 million in 2013
(details).
2013 budget ceilings:
x Set an expenditure ceiling on operational spending of line ministries (excluding defense, health, and
education) so as to reduce it by 200 million in 2013 and an additional 120 million in 2014 relative to
[the 2012 budget].
x Reduce subsidies to extrabudgetary funds outside the general government and domestic ferry boats by
115 million in 2013 and additional 97 million in 2014, relative to [the 2012 budget].
x Set a ceiling to reduce operational costs at higher educational institutions, athletic (federations, sports
centers) and cultural (theaters, museums, festivals) institutions to achieve savings of 97 million in 2013
and 47 million in 2014.
x Reduce investment spending by 150 million in 2013 and an additional 150 million in 2014.
x Set a ceiling on state transfers to SOEs, to save 250 million in 2013 and additional 125 million in
2014. Set a ceiling on transfers to STASY and ELGA to generate savings of 22 and 5 million in 2013
and 2014, respectively.
x Reduce the transfer of Central Autonomous Funds from the State to local governments by 10 million
in 2013 and additional 50 million in 2014 compared to [].
x Reduce transfers from the SATA (account for collective decision for local governments) by 40
million in 2013 and additional 110 million in 2014 compared to [].
General government and contingent liabilities:
x Concerning the energy sector: Pass legislation to (i) introduce a special solidarity surcharge on
producer turnover yielding [x] million per year; (ii) increase the RES special levy to [x]; and (iii) impose
an annual fee for holding a production license (whether in use or not)..
Tax reforms
Adopt legislation that:
Reduces the diesel excise duty subsidy provided to farmers from 95 percent to [80] percent of the
35
excise tax;
Increases the fee for law suits so as to raise an additional 50 million per year.
Reforms tobacco excise taxation by raising the per unit tax to 80 per 1,000 pieces and reducing the
ad valorem tax to 20 percent, while minimum tax is raised to 115 per 1,000 pieces. Rolled tobacco
tax will be set at 153/kg or equivalent if an ad valorem element is preserved.
Mandates signing an MOU between the government and owners of the merchant fleet to ensure
payment of tonnage tax aimed at raising 200 million in 2013-16.
Equalizes the social security earnings ceiling for contributions by raising the ceiling for employees
first employed before 1993 to that of employees first employed after 1993, which is 5543 per month.
Equalizes the excise tax on LPG and motor diesel oil by raising the LPG tax from 200/t to 330/t.
Imposes a tax on OPAP lottery gamesa surcharge of 2-4 percent sufficient to raise 200 million
Reduce the VAT refund for farmers to 6 percent of turnover.
36
Annex VI. Tax Administration Actions
Independence of the tax administration
x Adopt legislation to define the role and qualifications of the Secretary General.
Concerning qualifications, this will be a person with senior management experience,
expertise in tax matters, and an impeccable reputation (including a strong tax compliance
history)
x Adopt interim legislation to enable the delegation of powers from the Minister of Finance
to the new Secretary General.
Support of core functions
x Increase the audit capacity of the large taxpayer unit by transferring 100 auditor staff to it.
x Establish a unit responsible for high-wealth individuals and transfer 50 auditor staff to it.
Anti-corruption strategy
x Adopt legislation to implement a simpler set of accounting and record keeping rules and
repeal the Code of Books and Records.
x Adopt legislation to overhaul personnel management (covering procedures for rotation of
staff in critical tax offices and in mid to senior managerial positions)
Operating procedures
x Adopt legislation to remove the requirement that all tax declarations for the previous 10
years must be audited (but preserve the right of the revenue administration to audit earlier
years).
x Amend the AML law to: (i) ensure that the central authority in charge of revenue
administration is informed of all the cases sent by the FIU to local tax offices and to
SDOE; and (ii) to specify the type of information that should be provided by the tax
administration to the FIU.
Appendix I. Access and Phasing
[Table to be inserted]
Appendix II. Privatization Program
[Table to be inserted]